Think Low Mileage Lowers Insurance Rates? Think Again

Many drivers choose to thoroughly track the distance they travel and attempt to keep their annual mileages as low as possible, assuming their behavior will result in rewards like insurance discounts.  But those assumptions are wrong, according to the Consumer Federation of America.

The nonprofit organization created the profile of a 30 year old driver with an impeccable record to test whether mileage truly affects car insurance rates.  The CFA tested the profile with 5 of the country’s largest insurance companies, and compared quotes offered to the hypothetical driver with mileages at 5,000 and 20,000 miles per year.

Location played a factor if the driver lives in California, where insurers are legally obligated to use mileage as a factor when calculating insurance rates.  Outside of California Farmers, Progressive and AllState quoted the same, or near the same rate, regardless of whether distance traveled was 5,000 or 20,000 miles per year.

Some insurers failed to even ask for an estimated annual mileage.  State Farm was the only insurer among the big five to consistently award the test driver with lower annual premiums for driving less annual distance.

Stephen Brobeck, Executive Director of the CFA, believes insurers are failing drivers who are financially vulnerable to the true costs of coverage. 

“The high annual premiums for low mileage revealed by our research suggest that low and moderate income drivers are greatly harmed by the refusal of many insurers to reward this low mileage.”

Organizations like the CFA and other nonprofit institutions continuously lobby regulators and insurance giants to reform outdated practices.  Testing how rates are assigned based on distance gives nonprofits factual evidence that insurers are not always providing the best car insurance rates to drivers, which can go a long way towards kick-starting reform.

Image Courtesy of ©